BAKU, Azerbaijan, March 10
By Leman Zeynalova - Trend:
Russian energy supply uncertainty will create a renewed focus on Middle East hydrocarbons, Richard Thompson, Editorial Director at GlobalData’s MEED, said, Trend reports.
“Long-term uncertainty about Russian oil and gas supplies will sustain high energy prices for a prolonged period and create a renewed focus on Middle East hydrocarbons that will underpin a new economic and projects boom in the Gulf. The strategic impact of the crisis is to expose Europe’s overdependence on Russian energy, particularly its gas. As a result, the coming months and years will see a strategic realignment of global energy and a European diversification away from Russian oil and gas supplies to alternative sources such as renewables, coal, nuclear and Middle East hydrocarbons,” notes Thompson.
The analyst believes that in the longer term, unless a peace settlement is reached soon, Moscow’s actions in Ukraine will see Russian oil and gas exports reduced or even blocked altogether from the global energy supply chain.
He points out that Gulf’s oil producers have abundant supplies of low-cost oil and gas reserves. They have proven themselves to be reliable and stable suppliers over the past four decades, and they are investing heavily to increase production capacity.
“With its liquefied natural gas (LNG) expansion program underway, Qatar is well placed to become a major natural gas supplier to Europe, while Saudi Arabia, the United Arab Emirates (UAE) and the region’s other oil and gas producers are well positioned to increase their supplies of low-cost energy. Meanwhile, Libya, Iraq and Algeria will see renewed efforts to bring their hydrocarbons back on stream in a major way,” notes Thompson.
However, as senior oil market analyst at Rystad Energy Louise Dickson says, the the UAE announcement of 800,000 bpd production ramp up led to price falls, but price recovery likely unless OPEC+ matches increase.
“The UAE announcement of ramping up its oil production by 800,000 bpd triggered a sell-off as it was interpreted as a signal that potentially other OPEC members with significant spare capacity, such as Saudi Arabia and Kuwait, would consider this option and also open the floodgates. There was no such coordinated action, yet oil kept trading down, likely due to many stop orders placed at $120 per barrel, a threshold once breached on a downward trajectory was an unpalpable hold for the short-term bull market opportunists,” she notes.
Dickson pointed out that indeed, core Middle East OPEC countries Saudi Arabia, Iraq, the UAE, and Kuwait are the only bloc that could counterweight the supply risk from Russia.
“Together, the four countries have about 4 million bpd in spare capacity, that is, oil production that can be brought onto the market within a 3-6-month period. And most of these countries have vast onshore storage capabilities that can be tapped, meaning that a few million barrels could be nominated for exports in weeks, if not days. However, the unilateral increase by the UAE without any Saudi participation wouldn’t be nearly enough to cover the perceived, or real, market shortage, so until there is a consensus from OPEC+, prices should regain some, if not all, of the lost territory,” she added.
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